“Pay attention… this is important” – SMB Training Blog

Or at least that’s what I just told the traders on my row 10 minutes ago.  I have been spending a lot of time lately trying to eliminate the downside in my personal trading.  The good days are good enough, the average days are ok and average out to small wins, but there are still too many days where I sit at the desk and make too many losing trades in a row…. so I have been searching for ways to identify those days early, before the P&L hit is too big.  And on those days I should probably just go to a movie or go home, roast some chestnuts and open a bottle of red wine.

We trade a lot of retracement patterns, in various locations and permutations.  Check out these charts.  What do they all have in common?

Well, first of all they 3 appear to be pretty decent bear flags… in a different context I would probably be willing to give any of them a chance.  However, do you notice the long shadows (wicks, tails, whatever you want to call them) on the bottom of the candles?  This points to “hidden” buying… every breakdown out of these patterns has been bought.  (This is what old-school Wyckoff-style accumulation looks like on charts by the way.)  If you are the kind of trader who might look to play momentum out of patterns like this, you would have been trapped hitting the bids on every breakdown.

Regardless of how you enter these patterns, you have to acknowledge that there is a total lack of momentum or followthrough to the downside… so you can see pretty clearly that this is not an environment that favors your type of play.  This is pretty important, so you should pay attention to subtle technical clues like this in whatever patterns you like to trade.